Fourth International, September-October 1951

World in Review

Cracks in the War Economy

The economy of the United States remains the most powerful and most stabilizing factor in the capitalist system. And yet this supreme prop of the entire capitalist world structure has recently disclosed some noteworthy and quite unexpected weaknesses.

It took less than five years after World War II ended and US capitalism resumed production on a civilian basis for the first signs of an oncoming crisis to appear. Only Korea and the arms program enabled America’s economy to avert a catastrophic depression since 1949. Fresh testimony on this point was given by Senator George Aiken of Vermont in a speech reprinted in the Congressional Record on August 10th of this year.

“Only 14 months ago, the economy of our country seemed headed for a slump or at least a descent to lower levels,” the Senator said. “The Korean war definitely warded off serious economic trouble for the United States.”

But that is far from the whole story. It seemed to America’s rulers that the colossal government spending for the war machine would keep the economy going full blast in all departments. Much to their suprise and consternation, not even the explosion of inflation following the Korean intervention and on top of that the huge arms expansion of the past year have sufficed to keep the economy on an even keel.

Instead of skyrocketing sales and continued scarcities in the field of consumer goods, the bottom dropped out of the civilian market in the second quarter of 1951. This period witnessed a sensational “price war” among retailers. The four major industries which have been hardest hit are autos, radio and television, furniture and textiles. “The reductions in output in April and May as compared with the previous quarter affected all consumer durable products and ranged from 15 percent for electric ranges, to more than 50 percent for television receivers,” reported the Department of Commerce in its Survey of Current Business for July 1951.

In some cases the drops have actually been more severe. Most conspicuous was the television industry whose prospects were not so long ago touted as boundless. After manufacturing 874,634 sets in March, it had to cut production to 116,000 by July. This was not “more than half,” as the Department of Commerce cautiously reported, but less than one-seventh!

The N.Y. Herald-Tribune ran five articles to explain this paradox of “hard times in the midst of an ambiguous prosperity.” Donald I. Rogers, business and financial editor, touched off this series on Sept. 5 by posing the following questions: “Why, when production is at peak capacity, when personal income is at an all-time high, when employment is highest on record, should there be virtual depression for several key industries?” Why aren’t automobiles selling? Why has the furniture business gone to pot? Why is the whole textile industry wobbly? Why have sales of TV sets and appliances nearly dried up?”

Rogers and his co-authors were unable to give adequate answers to any of these questions. They simply consoled themselves with the observation that this was an “unorthodox economic problem,” that the “virtual depression” could not endure for more than a few months and that, in the end, as Rogers puts it, “an increasing number of war contracts may solve the problems of many worried executives in these industries.”

These writers feared to recognize the economic realities that mass purchasing power has been so slashed by inflation and taxation that the bulk of the people can today afford no more than the bare necessities, and that the productive capacities of the United States are so great that even under current restrictions they eannot find outlets either at home or abroad.

The sharp collapse of civilian production and civilian markets since April of this year provide confirmation that even the strongest sector of capitalism can find no way out of threatened depression except through continually expanding arms production and ultimately – WAR on a global scale.

Localized wars can stimulate the economy, especially through scare buying and hoarding – but cannot sustain it for an extended period. It is not enough to wage a war on the model of Korea which has devoured at least ten billions a year, not to speak of one casualty in every four on the battlefield. It is not enough to have an arms program on the “limited” basis of 20 to 30 billions a year. It is not enough to have conscript armed forces numbering from three to five millions. Nothing short of an all-out arms program and the subsequent artificial creation of shortages in civilian goods can suffice to ward off a new decline and depression.

That is the economic impulsion behind the staggering “peacetime” arms bill of “$61 billion plus” Congress passed in September which came on top of the already appropriated but still unexpended $35 billion of last year. This injection of not less than 100 billion dollars – in addition to all the other billions for European rearmament, military construction of bases, camps, etc., here and abroad – marks the longest step yet taken toward shifting US economy over to full-scale war production.

There is no question that such a transition has long been planned and carefully prepared by the capitalist ruling circles. But it is also clear that they never expected to make the transition so abruptly and under such critical circumstances. All of them, from the military down, have been caught off guard by the developments in the economic field where they have felt most secure, just as they have run into one staggering surprise after another in the sphere of international politics.

As proof of this we cite two facts, one, economic; the other, from the record of their highest strategic planning. Economically, the big monopolists have been caught with hugely inflated inventories even more acutely than the small fry. Prior to Korea, they had been reducing inventories which dropped from $56.6 billion in 1949 to $51.8 billion in 1950. By the beginning of this year these inventories leaped to $64.6 billion and by the second quarter had passed the $70 billion mark.

These increases to the tune of almost $20 billion suffice to show that not only the little enterprises but the biggest among Big Business have been caught by the sudden slump. Let us add that the recent inventory “reductions” hopefully reported in the press are due as much to recent declines in prices as to the frantic attempts to clear out jammed warehouses by sales promotions and cuts in orders and production.

A similar lack of foresight was evidenced in their arms planning where the Joint Chiefs of Staff represent the highest authority. A little more than a year ago in March 1950, Gen. Bradley, Chairman of the Joint Chiefs of Staff, appeared before the House and Senate Appropriations Committees and assured them that he personally and his colleagues “never went along with this large figure of $20 billion a year (for military appropriations) to protect the security of the United States.”

Bradley went so far as to say at the time: “If I recommended as much as $30 billion a year for the Armed Forces, I ought to be dismissed as Chief of Staff.”

These words sound incredible today when Bradley and his colleagues have not hesitated to demand, and Congress to blindly pass, appropriations over three times the size they all previously deemed unnecessary and even impermissible. And it was revealed during discussions in the Senate that the original demands of the various armed forces were actually higher by as much as 40 percent than the staggering sums appropriated.

By this we do not mean to imply that the top militarists are above deliberately lying when it suits their purposes, any more than their “honorable” civilian opposite numbers in the government. But the militarists are not fools. They, least of all, care to have to eat their own words in public. It is hardly likely that Bradley and the other Joint Chiefs would have committed themselves so bluntly in March 1950 if they had any inkling of what they would be proposing by March 1951.

As a rule there can be no painless transition from a peacetime to wartime economy. From the early indications, the abrupt transition, under obviously adverse conditions, that is now in process, will prove the most costly and onerous on record. The full consequences cannot be forecast at this point; but it is already clear that all the costs and hardships are being unloaded on the mass of our people.

Regardless of when the ruling imperialists make the big decision to plunge, into all-out war, their arms program is already beginning to spell disaster for the American people in a decline of their living standards. This is part of the terrible price monopoly capitalism is exacting from the American nation for its continued rule.

While the corporations burst with profits and the rich get richer, high prices, heavier taxes and low wages prevent the workers from buying the vast hoards of consumer goods piled up in the warehouses.

At the same time even the steppcd-up program of military production which is straining heavy industry does not guarantee stability to the operation of US capitalism. It lurches from one critical situation to the next – testifying to the extremely advanced stage of decay imperialism has reached in our time. Consequently along this road every increase in production brings, not greater prosperity and security to the people, but new difficulties in the economy which drive the imperialists to bring global war that much closer.